The China Blog: Online Gaming, Telecom, Digital Home...

Tuesday, September 30, 2008

ChinaQ based on OpenSIM?

I still haven't got hold of ChinaQ. Tried to call a couple of times but no one's picking up. Therefore, I'm still not 100% sure about what's the level of support from China Telecom. I doubt it's a strategic investment from the corporate level.I've also downloaded the client and visited the world. When I was there, it was totally dark (presumably night in China) and the world feels very much like Second Life in terms of aesthetics, features and functions. I had a conversation with some of the industry insiders in China, and they told me that ChinaQ seems to be built on top of OpenSIM. There hasn't been any confirmation or denial from Shenzhou Hengji about this. It makes sense given the similarity between ChinaQ and SL. Also, there have been user reports saying that when an error occurs in ChinaQ, the error message says Second Life.Some experts in China pointed out the limitations of Second Life based world in China. They told me that the bandwidth in China right now has difficulty in supporting the Second Life streaming technology, which is bandwidth hungry.

Wednesday, September 17, 2008

It's Official-Nexon Made $30 Million in the U.S. Last Year

I'm in San Jose busy preparing for tomorrow's Parks Associates workshop so I've missed all the live action in Austin. Many interesting articles based on various speechs and panels have been published by Gamasutra and other sites. One that caught my eye is on Min Kim's speech on the Free-to-Play market in the U.S.

I've heard rumors about Nexon's U.S. revenue for a while now and Min Kim went on record to confirm that Nexon's 2007 revenue in the U.S. was indeed $30 million, compared to less than $1 million in 2005, when microtransaction was almost a foreign concept to MMOs in the U.S."In 2005, Nexon America’s revenues were around $650,000. In 2006, when they added Paypal as a payment option, sales rose to $8.457 million, based on item sales. In 2007, once Nexon released its Nexon Cash cards to retail stores, revenue jumped to $29.334 million."

Based on my conversation with industry insiders, F2P, microtransaction based MMOs already represent a business worth $150-200 million in the U.S.. Nexon is the leader, followed by companies such as Acclaim ($30 million 2008 revenue expected), K2 Network, Outspark, Three Rings, and many other players. Although the market is still much smaller than subscription-based models--WOW alone makes $0.5 billion in the U.S., the momentum is strong. Our consumer data already shows that among non MMO players, interest in a F2P/Microtransaction based MMO is 6 times more than that in a subscription-based MMO. There's no question Warhammer will do well, but it will mainly draw its audience from WOW alumni and dormant MMO players, not fresh blood.

Interest among developers is also very strong. "Min asked his Austin Game Developers Conference audience how many people were developing or interested in developing free-to-play MMOs -- and roughly 70 percent of the audience raised their hands." In addition, large publishers such as EA have also recently introduced F2P games to the western audience.With a whole generation of kids growing up with F2P games and virtual worlds like Habbo, Webkinz, and Neopets, microtransaction may overtake subscription to become the predominant MMO model in the U.S. in the next five years.

Min Kim will be on my panel next week at the NY Games conference. I'll surely have my chance to grill him and spur some healthy discussion among my panelists, which represent companies from both camps.

Tuesday, September 16, 2008

ChinaQ is busy

I tried and tried and tried... Finally I was able to open chinaq.com and find the phone number. It's either too many have heard the wind and are trying to access the website or the company's server doesn't have enough capacity. I tried to call the company a couple of times and wasn't able to get through. I'll keep trying.

China Telecom, an 800 Pound Gorilla, Just Landed in Virtual World

According to 17173, a Chinese technology news website, and several other Chinese websites, Hurricane Ike just landed on China's 3D virtual world market. China Telecom, the largest telecom operator in China, with more than 40 millon broadband subscribers and more than 210 million local access lines, announced that it will collaborate with Shenzhou Hengji (a fully-owned subsidiary of Enreach Technology) and build a 3D virtual world called ChinaQ.

This is significant news, especially since I'm wrapping up a report on 3D virtual worlds, with a section dedicated to the Chinese market. After spending a couple of nights talking to CEOs of HiPiHi, Novoking, UOneNet, and iLemon, some of the leading companies in the space, how did I miss this?

Very intrigued, I put aside the report and spent some time digging through ChinaQ's website. First a little bit of background on Enreach Technology, its parent company. Headquartered in San Jose California, Enreach was established 10 years ago as a global provider of digital video entertainment systems for broadband IP networks. According to the company, it develops complete broadband-ready entertainment systems that enable operators to deliver revenue-generating services such as: VOD, TV over IP, DVR, Internet and E-mail. The company also developed the popular real estates website focus.cn, which it sold to Sohu.com in 2004.

While looking through the website and recent press coverage posted, I became confused. First of all, it seems the world has been under-development for a while and it already has virtual islands and spaces branded by BMW, Cisco, Dell, IBM, Nokia, Sony Ericsson, Sony, and Huawei. China Telecom seems to be another brand that has established a virtual presence in its world. This impression was confirmed by the first article covering this event. However, several other articles did make it sound like China Telecom is different from other brand partners and has deeper involvement with ChinaQ. In fact, China Telecom was the only brand featured on the homepage, making it look like ChinaQ is owned by China Telecom. Nevertheless, none of the articles mentioned whether China Telecom had made financial investment into the technology and platform. It could be just a co-promotion. Glancing through the website, it seems ChinaQ's main focus is on social networking. It also has many organized activities to engage users, including several that are game like. Since it's still under closed beta, it's hard to tell how popular it is. The company said it would release 200 accounts and if you know Chinese, you can try your luck by sending an email to master@chinaq.com.

My initial investigation created more questions than answers. I'll surely try to approach the company in the next couple of days and see whether I can find more information. Assuming China Telecom is seriously interested in this, I can see several interesting possibilities. China Telecom, which has a very popular value-added service portal called vnet.com can potentially integrate 3D virtual worlds into its offerings. It could establish a community/social network for its service subscribers and increase customer satisfaction and retention. It can reward loyal customers with virtual goods and loyal virtual world residents with real-world services. It can also provide VoIP services in the world. Assuming it is serious, ChinaQ will pose serious threats for HiPiHi, Novoking, and UOneNet, the three aspiring virtual worlds companies. (Of course, let's not forget CRD, the juggernaut backed by the Beijing Municipal Government) None of them has launched to the public yet so ChinaQ may not be far behind.Stay tuned. I'll come back with more information if my inquiry goes through...Feel free to submit your questions through the comments section.

Thursday, September 11, 2008

Podcast on Virtual Worlds and Enterprises

A few days ago, Blake Glenn at ECT Networks offered to interview me regarding my views on enterprise usage of virtual worlds. Although enterprise is only a small part of Virtual Worlds: the Internet of Avatars, the new industry report I'm writing (the focus of the report is on 3D social and entertainment worlds), I have talked to several companies working in the enterprise space and decided to take the opportunity. He asked several very good questions. I'm posting an excerpt here but you can also go to this link for the full interview. http://www.linuxinsider.com/story/Parks-Associates-Michael-Cai-Business-Gets-Done-in-Virtual-Worlds-64450.html

Here are some excerpts of our conversation:LinuxInsider: What reasons would a company have for utilizing virtual worlds from a business perspective?Michael Cai: There are a variety of reasons. First of all, for the brand companies and media companies, they use virtual worlds to market and promote their brands and content and products, and also to interact with their fans. In terms of the enterprise side of the story, there have also been efforts in experimenting with e-commerce through virtual worlds. For instance, a Circuit City or a Sears might be using virtual worlds to promote some of the new products they have, or for experimenting with conducting real-world e-commerce through virtual worlds.And then if we look at what some of the large global companies are doing with virtual worlds: collaboration, customer service, events and meetings -- whether it's internal meetings or external meetings with clients -- training, product and concept development and validation, as well as consumer research. Those all have been done in virtual worlds in the past several years. Also, virtual worlds have been used for serious purposes, such as military training healthcare applications, first-responder training and educational purposes. Actually, a lot of universities have set up a presence in virtual worlds.LI: It sounds like there's a variety of different companies in the market delivering these services. How old is the virtual world market?MC: It's been around for more than 10 years, actually. ActiveWorlds started a simple version of virtual worlds back in the early '90s, but Second Life made the virtual world industry known to the public because of all the press coverage they got -- good or bad. And then in terms of really serious use of virtual worlds for enterprise applications, that kind of emerged in the past three years or so, but more so in the past year than before.LI: You mentioned some applications on the enterprise side for virtual worlds -- like marketing and training and events, and things like that -- but what do you see as the real sweet spot in terms of how virtual worlds can really positively impact business that you haven't talked about?MC: In terms of positive impact on business, I think right now when companies evaluate whether they should invest in virtual worlds and use some of those enterprise applications, I think cost saving is normally an incentive. But right now, because the market is still very early, most of the companies are still experimenting. But not many case studies have been established, so I think that focusing on cost-benefit analysis is probably not the only method for judging whether you should invest or not. It also depends who you are, what kind of business you're in. If you're a technology company, if you're a large global company, yeah, I think it's definitely worthwhile experimenting.LI:Are large corporations leading the way, or do you see mid-size and smaller companies jumping on board as well in the near future?MC: I think right now, percentage-wise, we're seeing more large companies, global companies. If you think about IBM, Cisco, Sun Microsystems (Nasdaq: JAVA) and, more recently, Nortel -- all [are] kind of jumping into this and supporting the virtual world industry for enterprise applications. Most of them are not only large global companies, but they're technology companies as well, so they have some vested interest in promoting these.Then, after these kinds of companies, you also have several large global companies that are not directly in the technology space, but because they are so global, geographically distributed, it's hard for them to hold regular events or training exercises or what have you among the employees scattered around the world. So you have Accenture, PWC -- a lot of the consulting companies, as well as Unilever and those kind of global brands -- utilizing virtual worlds for their global employees.In terms of smaller companies, there are small companies kind of experimenting -- not only small enterprise but even SOHO (small office-home office) and entrepreneurs who have very, very small businesses. Some of the applications can include, like, if you're in the design business, you can build a virtual showcase, a 3D showcase, a really fancy version, and show your clients without flying to them and visiting them. You can show them in the virtual world.